MW: Treasurys off as traders digest Citi, new supply
U.S. selling $62 billion in debt this week; Obama plans loom larger for rates
NEW YORK (MarketWatch) -- Treasury prices fell Monday, pushing yields higher, after the U.S. government agreed to invest $20 billion in Citigroup Inc. and guarantee about $300 billion in its troubled assets.
The rescue comes as the Treasury Department sold a record amount of two-year notes during a holiday-shortened week.
Ten-year yields rose 11 basis points, to 3.34%. Bond prices move in the opposite direction of their yields.
U.S. equities headed sharply higher, extending Friday's late gains. The Dow Jones Industrial Average closed up 4.9% at 8,443.39, according to preliminary results. See Market Snapshot.
Also on the negative side for bonds, President-elect Barack Obama's reported interest in seeking a $500 billion economic-stimulus package raised concerns that supply of Treasurys in circulation will balloon even further.
"One thing for certain: All this stimulus and tax cuts will be funded from the Treasury market," said Andrew Brenner, co-head of structured products and emerging markets at MF Global.
The government sold $36 billion in two-year notes to yield 1.269%.
Investors bid $2.08 for every dollar being sold, the least since July 2006, which some traders said was not surprising given the larger amount offered.
The yield on current two-year notes rose 15 basis points to stand at 1.52%, the highest this month.
The Treasury will also sell $26 billion in five-year notes on Tuesday.
Traders also said volume may be thin this week as the Securities Industry and Financial Markets Association is recommending bond trading end early on Wednesday and Friday. The market will be closed on Thursday in observance of Thanksgiving.
Meanwhile, some bond analysts worried what the Citigroup rescue indicates about the extent of the problems continuing in the financial sector.
"The Citi news, while soothing for stocks, still begs questions regarding what shoe could drop next," said Roseanne Briggen, Treasury analyst at Informa Global Markets.
"Treasury traders have been defensive," she wrote in an email.
On the data front, sales of existing homes during October showed show the pace slowed 3.1% to a seasonally adjusted annual rate of 4.98 million units, worse than what economists surveyed by MarketWatch had expected.
